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Political Centralization and Government Accountability

Info IEB Number 24, March 2016

How far shell we go in the process of European integration? What determines if power should be centralised or decentralised? How many layers of governments should there be?
Traditional economic analysis of fiscal federalism has emphasised the importance of differences across regions as a major determinant of the choice between centralising and decentralising political power. It has reached the conclusion that different people need different governments. Centralisation – the argument goes – works well in an area that is internally homogeneous, while it is doomed to fail in a territory that is internally heterogeneous.